You had a great business idea, started a business, got your first customers, opened up a bottle of champagne to celebrate your first 100k, have good reviews and recurring customers, and have some people helping your business. But you’re wondering how quickly the cash disappears from your bank account, and you’re tired of constantly worrying whether you can pay your suppliers at the end of the month.
You deserve a financially healthy and stable business. You are a glorious business owner who is worth it. What’s more, you are capable of achieving financial stability and success.
There are many ways to improve your business’s financial stability. Here I give you the six most important guidelines that empower you to attain stable and sound financials, ensuring your business growth and resilience.
1) Keep personal and business finance separate
The bottom line for each smart business owner is that you should never mix your business and personal finances. From day one, set up a separate bank account for business purposes, and don’t pay your vacation or reno from your business funds. It may cause tax complications, and in extreme instances, it may lead to the failure of your business.
So, even if it can be pretty troublesome, have entirely separate business finances and stick with it consistently. Trust me; this is crucial for your stable growth.
2) Have a budget and use it
Without defined goals, it’s rather hard to navigate, isn’t it? As a savvy entrepreneur, you have a business plan, know your key products, and have a vision of how your business will look in 3-5-10 years. You also know your target market, typical customers, and industry trends. But you don’t have a budget? Why?
For a business owner, having a budget is vital. And make no mistake, you are capable of preparing one. At first, it doesn’t need to be too complex at all. As you gain more experience, you can finetune it. What’s important is that it needs to be realistic. No lies to yourself – not worth it.
You have a budget, and now what?
To build a financially healthy business, you need to use that budget … regularly. Block out an hour each month or quarter and do a little exercise: compare your actual figures to your budget. Identify the most significant gaps, ask “Why” and map out your strategy for how to move forward.
3) Invest in your customer relationship
Let’s clear this: you cannot build financial stability without a stable income. If you have a loyal customer base, you’re (almost) out of the woods. A satisfied client receiving excellent customer experience is gold for your business.
But you also want them to pay, don’t you? You need a reliable revenue stream. So, make the payment process as easy as possible. The tools are endless, from sending invoices quickly enough to enabling online payments and to setting up recurring direct debits.
The point is: value and nurture your diligently paying clients; they will keep your business afloat.
4) Control your expenses
It’s not rocket science: if you’re constantly overspending, sooner or later, you’ll end up in financial hardship. So part of your financial review should focus on your expenditure. Constantly challenge: is this necessary for my activity? Do I need to pay this in advance? Could I negotiate better payment terms?
Caveat: though rationalising your expenses should always be at the forefront of a smart business owner’s mind, you shouldn’t do it at all costs. You also need to acknowledge that occasionally you may run at a cash deficit; for example, when preparing for a new product launch, you’re building a new website or app. There’ll be times when you need to invest in your business to get a return. Here’s when your budget comes in handy.
5) Be prepared for the low season
My grandma kept saying to me when I was little: always save for the rainy days. Not very optimistic, I know – that’s my genetic heritage … anyhow, she got the point there. Having some reserves in your business savings account gives you confidence that you’ll withstand when your sales are slightly down than expected. So get into the habit of setting some funds aside regularly and resist the urge to use them – this reserve will be your last resort.
If you’re selling seasonal products, you can plan ahead. You may introduce a unique campaign to cover you for the low season. Tap into your business intuition – it’ll undeniably impact your financial stability.
6) Ensure your systems work for you
Having the right system and processes in place is critical to achieving financial stability. Your customer relationship management, your marketing, your booking system, your invoicing software, your inventory management, your time and job/project management, your accounting system, your payment system and processes, and your debt collection – to name a few – all impact your financial success.
Your focus should be on the word ‘right’: I’m far from suggesting that you need to implement all the shiny, the very best … and extremely costly software and systems. My experience shows that each and every business needs to figure out what works best for them in their specific circumstances and in that particular development phase they’re in. If you can streamline a process, you must do it, and that will contribute to your sound financials.
Key takeaways
Achieving financial stability is critical for your business’s success and growth. It’ll make you sleep well. And most importantly: you can do it. Don’t forget: a small change can make a real difference in your business life.
The basics are simple: continuous, stable income and controlled expenditure. Budgeting, planning and regular reviews are cornerstones of your financial management.
Give it a go and I can assure you the impacts will be incredible!
I believe in You: you’re a champion 🏆
PS: If you’d like to learn more about the basics of bookkeeping, please check out the free Bookkeeping 101 mini-course by 👉 CLICKING HERE
